Coronavirus impact: Punjab govt defers capex to next fiscal amid steep revenue fall

Key Highlights

• With revenue mop-up hit hard by the coronavirus pandemic, the Punjab government has deferred all its capital expenditure plans to next year.
• Punjab has seen all its revenue sources including tax on liquor slowing down.
• Punjab FM Manpreet Singh Badal said the state could only pay committed expenses such as salaries, pensions,  debt repayment, subsidies on account of electricity, and old age pensions.
• Punjab is among the most indebted states with debt to gross state domestic product (GSDP) ratio in FY20 being nearly 40%.

In what suggests strained state finances could take a heavy toll on infrastructure building, the Punjab government has deferred all its capital expenditure plans to next year. The state would, however, provide funds to only those projects which are nearing completion. Hit hard by coronavirus-triggered lockdown, Punjab has seen all its revenue sources including tax on liquor slowing down. Saddled with debt, the state has no option but to cut the capex of Rs 10,280 crore proposed for the current fiscal.

"As far as Punjab is concerned, we are under extreme stress. So, we have deferred all the capital expenditure to the next financial year. We will be very happy if we pay our salaries, pensions, service our debts, pay subsidies on account of electricity, and old age pensions. These are our committed expenses which leave us with very little resources," Punjab Finance Minister Manpreet Singh Badal told BusinessToday.In.

"We would though provide funds for those projects which are nearing completion," he added. Punjab is among the most indebted states with debt to gross state domestic product (GSDP) ratio in FY20 being nearly 40%. The outstanding debt of the state is projected to be Rs 2,48,236 crore in 2020-21(BE) which is 38.53% of GSDP.

With revenue mop-up severely impacted and the growing need to direct funds towards healthcare, both Centre and states have seen their fiscal position coming under massive pressure. Lower revenue collection is set to impact the mega National Infrastructure Plan (NIP) which has to be supported by both Centre and states almost equally in the ratio of 39% and 40%, respectively. The remaining 21% is expected from the private sector.

Meanwhile, Chhattisgarh Commercial Taxes Minister TS Singh Deo said that lower tax collection would certainly impact infrastructure development as reduction in salaries or pensions was not an option to cut state's expenditure. He said that GST collection in the state has been impacted due to lockdown but its revenue is protected at 14 per cent over the base year (2015-16) tax collection as per the law. The other revenue streams have also been impacted but were not substantial.

With the nation's GDP projected to contract in the current fiscal, Deo said, there will be less revenue collection and hence less funds available for spending.

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